Iron ore miners in the Labrador Trough will, for now, rely on existing transportation options after CN shelved plans to look at constructing a $5-billion, 550-km rail line through the region | Courtesy of CN
Iron ore miners say it is business as usual following CN’s suspension of a feasibility study on a $5-billion project to expand rail and ore-handling
capacity in the resource-rich Labrador Trough region.
Last August, CN, the Caisse de dépôt et de placement du Québec, and six mining companies agreed to begin the study in order to assess projected costs and
engineering parameters for building a proposed 550-kilometre multi-user rail network to haul iron ore from the Labrador Trough to the port town of
Sept-Îles, Quebec. It also evaluated the feasibility of building a handling and storage facility with an annual capacity of 125 million tonnes in
Sept-Îles. Currently, the Quebec North Shore and Labrador Railway, owned and operated by the Iron Ore Company of Canada, is the common carrier for two
mines run by Cliffs Natural Resources, as well as the Labrador Iron Mines Holdings project. ArcelorMittal uses its own railroad that connects its Mont
Wright operations to Port Cartier.
Despite reported progress, in February, CN cited existing market realities and “anticipated delays with mine development projects in and around the
Labrador Trough,” as justification for its move. Conflicting construction schedules and the diverging needs of the projects made it hard for the rail
carrier to round up the iron ore volumes needed to support the new capacity. Adriana Resources and Century Iron Mines did not sign on to be part of the
study, which also played a role in CN’s decision. The mining companies involved in the study were Cliffs Natural Resources, Champion Iron Mines, Labrador
Iron Mines Holdings, New Millennium Iron Corp., Cap-Ex Ventures Ltd. and Alderon Iron Ore Corp.
For Labrador Iron Mines Holdings, the impact will be small. “Our facility has been producing for some time, and we thus have access to existing transport
solutions,” said Keren Yun, vice-president of investor relations and communications. “While we agreed to participate, it was only at minimal cost, to see
what alternatives could be made available. However, the projected completion date for the new line was only in 2017 or 2018, which reduced its potential
value to us.”
Ian Chadsey, a spokesperson for Alderon, said his company will move ahead using existing transportation infrastructure. Alderon is not slated to begin
production at its Kami project near Labrador City until 2016, which gives it flexibility with planning. Chadsey said the company was not reliant on the
proposed development, as the Quebec North Shore and Labrador Railway covers projected needs. “We are located close to an existing rail line, which
currently has more than enough capacity, so we should be okay,” he pointed out.
New Millennium Iron issued a statement noting that while the projected rail solution was a possible option to transport production from its Taconite
project to the coast, its base case is to transport slurry concentrate through a ferroduct. “This suspension will have no impact,” said Dean Journeaux, the
company’s president and CEO. The Taconite project is currently in the feasibility stage.
The Labrador Trough, which straddles the Quebec-Newfoundland and Labrador border south of Ungava Bay for 1,600 kilometres, has hosted iron ore mining
operations for almost 60 years. However, the region has been attracting increased attention, as growth in emerging economies drives up demand.
While development opportunities abound, economic times are tough, making investors hesitant about fronting the considerable dollars needed to get new
operations off the ground. Their reticence is exacerbated by the region’s relative isolation from existing infrastructure, particularly the port
facilities required to send production off to major markets.
The rail feasibility project is off the table for now, but it is unclear for how long. When the initiative was announced last August, the price of iron
ore, which is driven by demand from Chinese markets, languished below US$90 per dry metric tonne. However, prices bounced back up to more than $150 per
tonne in February, driven by shrinking Chinese inventories that reportedly hit a three-year low. Shortly after CN suspended its study, Champion Iron Mines
announced it would refocus its efforts on building support for a rail line south from its Fire Lake North property to Sept-Îles.